Why in News?
The first official gauge of the economy’s performance so far in 2024-25 has been recently released by the Reserve Bank of India (RBI).
What’s in Today’s Article?
- Highlights of the RBI’s Report
- Bright Spots in India’s Economy’s Performance
- Indian Economy’s Challenges and Way Ahead
Highlights of the RBI’s Report:
- Gross Domestic Product (GDP) growth:
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- Earlier this month, the RBI reduced its Q1 GDP forecast from 7.2% to 7.1%.
- The RBI anticipates 7.2% GDP growth through 2024–2025 after last year's 8.2% surge.
- Growth in the Gross Value Added (GVA):
- For the first time in a year, growth in the real GVA in the economy outperformed GDP growth, with a 6.8% uptick in the first quarter (Q1) of 2024-25.
- This GVA growth in Q1 has been driven by significant growth in the Secondary Sector (8.4%), comprising construction, utility services (such as electricity, gas, water supply) and manufacturing sectors.
- Employment generation:
- India provisionally created 46.7 million jobs in the financial year ended March 2024, taking the country's total employment to 643.3 million.
- The country's employment growth rate stood at 6% in that fiscal year, versus 3.2% in the previous fiscal year.
- Bank credit growth:
- Credit to agriculture and allied activities remained robust, registering a growth of 18.1% at Rs 21.55 lakh crore in July 2024, compared with 16.7% a year ago.
- Credit growth to industry strengthened significantly at 10.2% to Rs 37.05 lakh crore in July 2024 compared with 4.6% in July 2023.
- Credit growth to services sector moderated to 15.4% in July 2024 from 19.7% a year ago, primarily driven down by relatively lower credit growth in non-banking financial companies (NBFCs) and trade segments.
Bright Spots in India’s Economy’s Performance:
- Normal monsoon: It will boost farm sector output and ease inflation, which could lift the weak rural demand and private consumption.
- Private investment: Increased demand would lessen the need for government expenditure to support growth by encouraging private firms to invest in new capacities.
Indian Economy’s Challenges and Way Ahead:
- The prolonged general election has severely hindered public capital expenditure, and the government will have to work even harder to reach its spending targets.
- The policymakers need to urgently pursue meaningful reforms across all aspects of the economy, and improve the efficiency of its institutions and the judiciary.
- This is critical to lift its growth potential and fulfill hopes of creating gainful employment for its young, fast enough for India’s demographics to yield a dividend.